In the suit filed in U.S. District Court in Los Angeles, the members of the Motion Picture Association of the America claimed Zediva is illegally streaming the movies without paying licensing fees to the studios.

“Companies like Zediva profit off creators without paying them what is required by the law,” Dan Robbins, the MPAA’s associate general counsel, said in a press release.

Zediva, which launched last month, rents movies for as little as $1 each by streaming the video over the Internet. The company buys DVD movies and lets the renter play them back remotely from a bank of DVD players located in the firm’s Santa Clara data center.

Zediva representatives did not immediately respond to requests for comment about the suit.

Company executives have contended the firm is on solid legal ground under previous court rulings that have allowed brick-and-mortar video stores to rent DVDs. The company was also relying on a 2008 federal court of appeals ruling that allowed a cable TV operator to set up a networked DVR system.

But the lawsuit claims that the “comparison of the Zediva service to a rental store is disingenuous, and Defendants are attempting to rely on technical gimmicks in an effort to avoid complying with U.S. Copyright Law.”

“By characterizing Zediva as a legitimate and lawful competitor to licensed online services and as ‘fully compliant with the law,’ Defendants threaten to confuse customers and the public … causing even greater immediate and irreparable injury to Plaintiffs,” the suit said.

Zediva’s promotes itself as a service that will have the top 100 new movies from any 12-month period, but the lawsuit claims each movie is a separate infringement. The suit seeks at least $150,000 in damages for each case of infringement.

UPDATE: Here’s a statement from Zediva:

“We have just been made aware of the lawsuit in the same way as you, through an online press release. Given that we just found out about it, we are currently reviewing it and don’t have a further response at this time.”